Does retirement affect alcohol expenditure? Evidence from urban Chinese older adults in 2002-2009

Abstract

Exploiting China’s mandatory retirement policy, we used fuzzy regression discontinuity design to estimate the effect of retirement on household alcohol expenditure among urban Chinese older adults ages 50–70. Drawing on data from the Urban Household Survey of China Statistics Bureau for the period of 2002–2009, we found that having a retired male household head significantly reduced total household expenditure on alcohol by 32%. After breaking down by different types of alcohol, we found that the retirement effect was largely driven by expenditure on liquor. We explored two potential mechanisms that may explain the retirement effect. The first mechanism relates to decreased disposable income after retirement and the second mechanism involves reduced demand of social drinking after retirement. Our findings suggest that the urban Chinese older adults experience substantial change in such health behavior as drinking as they retire. This has important public policy implications as China is facing a severe challenge of rapid population aging.